Automation Development: Change the Industry

A company can take several different approaches when developing new automation technologies related to purchased production equipment. But all approaches are not created equal. Automation is not a core technology for most businesses, meaning most companies do not design and manufacture automation systems. However, automation is a very important and necessary tool for any company that depends upon an automated process to manufacture or produce its final products. The intellectual property (IP) related to the development of automation is a valuable asset that can change not only one company but an entire industry.

My experience is in the upstream oil and gas industry. Before my retirement, I led a team of instrumentation, control, and electrical professionals within ExxonMobil Upstream. We partnered with our suppliers and engineering firms to develop new enabling technologies and project delivery practices and procedures for capital projects. Here is what I learned about the advantages and disadvantages of three approaches to automation project development:

Approach 1: The owner works with a single supplier and develops new technologies specifically for internal company use only. The owner owns the IP or shares the IP with a single supplier. The owner decides whether to only use the technology internally to achieve an advantage over its competition or to sell the technology for others to use. In the latter case, the technology is typically sold to users who are not direct competitors. This is a very exclusive approach that brings changes to only the single owner’s company or the few companies that purchase the technology.

• Approach 2: The owner works with a single supplier and develops technologies that the single supplier can sell to its other clients. The single supplier owns the IP.

• Approach 3: The owner works with all the suppliers that can develop the technologies, and all the suppliers can sell the developed technologies to all their clients. Each supplier owns the IP for the specific technologies it develops. This is a very open approach that can bring changes to multiple industries.

Pros and cons

Each approach has advantages and disadvantages. Approach 1 can and has been very beneficial to companies with large automation staff. They can develop technologies that only they can use, and these technologies can and have provided strategic advantages over their competition. However, there are downsides.

First, the single supplier that is manufacturing the technology will only be selling this technology to one client. That gives the supplier little financial incentive to develop a low-cost solution, to develop and maintain expertise in the technology, to sustain the technology, and continuously improve the technology. Typically, the user or client must develop the expertise in-house to sustain, maintain, and improve the technology. The user may also have to develop internal expertise to deliver the technologies to all its new facility projects. Lastly, the single user does not learn from the experiences of others using and improving the technology.

Companies that routinely develop technologies this way must continuously grow their automation organization to support all their exclusive technologies. This results in a continuously growing automation organization that depends upon an aging workforce for the technologies not supported and sustained by a single supplier.

In the case of approach 2, the supplier can sell the technology but has no competition in developing and manufacturing the technology. Competition provides an incentive to lower the cost of development and manufacturing, and also to accelerate the development of the technology.

With approach 3, a company may lose some competitive advantage by not having exclusive use of the technology, but it realizes a number of other benefits. First, with all the possible suppliers developing a version of the technology, competition is maximized. This competition accelerates the development of technology. It also ensures the lowest possible price for the technology. Second, the technology becomes an industry technology that will be sustained, cost-effectively maintained, and continuously improved by the manufacturers and not the users. Lastly, with multiple users, all user companies benefit from the collective experiences.

The competitive advantage of technology does not come from just having the technology. The competitive advantage comes from how it is applied, how broadly it is applied, and how the technology is integrated with other related systems. A company can have the technology but not use it properly, not use it broadly at all facilities, or not fully integrate it within its systems. Technology can be an industry solution, but only a few companies may fully benefit from the solution.

(Courtesy: International Society of Automation)